Ladies and gentlemen, welcome to the Third Quarter 2022 Results Conference Call. [Operator Instructions] I now hand over to Jean-Pierre Sbraire, CFO, who will lead you through this call. Sir, please go ahead..

Thank you. Hello, everyone. Jean-Pierre speaking. We reported solid third quarter results that continue to demonstrate TotalEnergies' ability to effectively leverage the very strong and volatile environment. This success allows us to further strengthen the balance sheet and to share the benefits with our employees and with our shareholders.

The third quarter environment was marked by volatility at a very high level.

Brands remain strong, averaging more than $100 per barrel in the fourth quarter and reversed the decline late in the quarter after OPEC+ announced a $2 million per barrel copper reduction in early October, which demonstrates that OPEC wants to remain in control despite the risk of lower world economic growth.

European gas prices were pushed to the roof by increasing geopolitical tensions and the risk of not enough supply during winter period, even if this risk is limited as gas storage in Europe are full. As a consequence, NBP nearly doubled in the third quarter to more than $42 per MBtu. A strong driver for the results is our average LNG price, of course.

It was lifted by the spike in natural gas prices and reached a record $21.5 per MBtu in the third quarter, an increase of more than 50% quarter-to-quarter. We capture the full benefits of this LNG price, thanks to our integrated strategy.

European refining margins, NCV, despite an increase in energy costs reached $100 per tonne in the third quarter, still among the highest we have ever seen, but down for their record-setting second quarter levels, close to $150 per tonne.

In this context, the company generated third quarter adjusted net income of $9.9 billion or $3.83 per share in the third quarter, in line with the previous quarter. These strong results were achieved despite the increase in taxes.

I will tell you more on the UK tax in a minute, and the decrease in production and oil prices, but mitigated by higher integrated LNG results. Debt adjusted cash flow came in at $12 billion for the third quarter, down 12% from the second quarter, mainly due to lag effect in the dividends received by equity affiliates.

Year-to-date, the FCF [ph] is $38 billion, an increase of 80% compared to last year.

Cash flow generation of this order of magnitude marks the start of an area for the company, an area that would be marked in the quarter held by a zero net debt balance sheet, an accelerated transition for the multi-energy future and an upgrade to cycle cash flow payout for shareholders of 35% to 40% from 2022.

These were the main messages from the strategy and outlook presentation last month and the third quarter results confirm these messages. As part of the environment, the effective tax rate of the company increased to 44% in the third quarter from 39% in the second quarter.

This is largely due to a higher tax rate for E&P activities as a result of the UK energy profit levy, $0.6 billion impact on the quarter for a four months of taxation. Despite increased taxes, $26 billion paid in aggregate by end of September, mostly in producing countries.

Our cash flow generation is, in any case far stronger than we had projected a year ago, thanks to the favorable price environment. We estimate the impact of the EU solidarity tax at around €1 billion.

Operationally, the company's hydrocarbon production was 2.7 million barrels oil equivalent per day, a 2.5% decrease from the previous quarter, mainly due to planned maintenance, notably at activities and unplanned downturn at Kashagan, partially offset by the entry into production of Sepia and Atapu and the ramp-up of Mero 1, all this field being in Brazil.

Year-to-date, OpEx are trending up to $5.6 per barrel on average. This includes a higher cost of energy, representing $0.25 per barrel. Except these higher energy costs, we do not observe any cost inflation at OpEx level. Cost discipline is a constant priority.

We are in a commodity business and maintaining a low breakeven is essential to weathering the cycle. Looking at the results segment-by-segment now.

Integrated gas, renewable and power iGRP, posted record adjusted net operating income of $3.6 billion this quarter, up $1.1 billion from the second quarter, and cash flow of $2.7 billion driven by higher LNG prices and strong trading activities inline with previous quarter.

The favorable environment allow us to overcome the quarter-to-quarter 10% decrease in LNG sales that resulted mainly from the Freeport LNG outage and planned maintenance at Ichthys LNG. We expect fourth quarter LNG prices to be above $17 per MMBtu, still at high, I remind you that 70% is linked to Brent formula and 30% to gas spot index.

The company continued to execute on its LNG growth strategy by acquiring a stake in North Field South LNG project in Qatar after the Northeast LNG last June.

In the electricity business, growth renewable power generation capacity reached 16 gigawatts at the end of the third quarter, up 4.4 gigawatts over the quarter, including 3.8 gigawatts from the Clearway acquisition, and the start-up of the Seagreen offshore wind farm in Scotland.

We indeed closed the acquisition of 50% of Clearway Energy in the US and announced another key acquisition in renewable in Brazil yesterday -- it was yesterday.

Net electricity production was 8.8 terawatt hour in the fourth quarter, up 10% from the second quarter, thanks to the high feasibility utilization rates, and growth in renewable power generation. EBITDA from the electricity and renewable business was $160 million in the third quarter, stable compared to the previous quarter.

Operating cash flow for iGRP was $4.4 billion in the fourth quarter, including a positive impact on working capital due to the reduced margin growth and seasonality in the gas and power supply business.

The E&P segment generated adjusted net operating income of $4.2 billion and cash flow of $6.4 billion in the third quarter, down about $0.5 billion and $1 billion, respectively, throughout the second quarter, because of lower production.

Quarter-to-quarter, our average realized liquid price fell by almost $10 per barrel, but our average realized gas price increased by around $6 per MBtu.

We are ramping up activities in E&P, notably the start-up of production at the Ikike field in Nigeria, the launch of the Begonia project in Angola and the Fenix project in Argentina, and a significant gas discovery in Cyprus.

The combined Downstream segment generated $2.4 billion of adjusted net income and $2.9 billion of cash flow in the third quarter, an outstanding performance even if decreased compared to the record set in second quarter, thanks to strong distillate margin, and a good trading performance comparable to previous quarter.

To put this into perspective, over the first nine months, the Downstream generated 4 point -- sorry, $8.4 billion of cash flow, twice the level of the same period last year, and more than enough to cover the entire regular dividend for the year.

Our expectation is that refining margin should remain strong, particularly for distillates, given the ban on imports of Russian petroleum products into Europe, effective February 2023.

At a company level, over the first nine months of 2022, we generated operating cash flows before working capital changes of around $37 billion, an increase of 85% over the same period last year. Year-to-date net investments of $12.5 billion are in line with our guidance of $16 billion for the year, including $4 billion in decarbonized energy.

We bought back $5 billion of our shares over the first nine months and plan to buy back another $2 billion in the first quarter. Our gearing ratio is down to 4% at the end of the third quarter.

Given our solid financial position and the strong cash flow generation, the company is expecting a balanced value-sharing policy that includes an exceptional bonus of one-month salary to all our worldwide employees, and the new shareholder return policy announced in September that targets 35%, 40% cash flow payouts.

In addition to the regular third interim dividend of €0.69 per share, which represents a 5% increase from a year ago, the Board decided to set the ex-dividend and payment dates for the interim special dividend of €1 per share in December 2022. That concludes my comments, my remarks. And now we can go to the Q&A..

[Operator Instructions] The first question from Irene Himona with Societe Generale. Please go ahead..

Thank you very much. Good afternoon Jean-Pierre. I had two questions, please. Firstly, you had quite a substantial $7 billion working capital release in the third quarter. I wonder if you can talk about the main components. And then what could we -- if we could anticipate something for Q4? Any guidance would be very useful.

And secondly, on the Russian impairments you took this quarter, can you please remind us what remains is the net book value after these impairments? And since the strategy you presented last month has left out everything to do with Russia. Will you, over time, just write-off whatever remains on the balance sheet, please? Thank you..

Thank you, Irene and good afternoon. Yeah. So the first question regarding working cap. So that's true. We reported $6.7 billion working cap release in the third quarter. And there is four, I would say -- or three main factors behind this performance.

So the first one for obvious reasons, was a working capital release in relation with the price effect on stocks of around $3 billion -- representing plus $3 billion more or less.

We have a $2.4 billion working cap release as well, linked to valuation margin release for our gas and electricity business, thanks to several optimization and exposure reduction actions. We have as well a $2.1 billion working capital lease in relation with our E&P tax payable. It's mainly the case in North Sea countries, so Norway and UK mainly.

And on the other side, we have a minus $0.8 billion of various effects on payables and receivable balance. So that was the main driver behind this performance. So for the first quarter, of course, it will depend -- it will highly be dependent on the evolution of the prices for the valuation of stocks and for the gas and electricity variation margins.

But I have in mind that most of the tax will not be paid in 2022. It will be paid rather during the first quarter 2023. So I do not anticipate a cash out -- a stronger cash out or reversal of this performance in the fourth quarter according to the current. So now perhaps your question on impairments.

Yes, we will come in our accounts new and additional item and the value of our shares for 3.1 billion in the thirds quarter because of course we have to review the cash flow long-term scenarios to include in fact greater uncertainties on cash transfer from Russia. So that was the main driver on behind this impairments.

So [Audio Gap] and now given all the different impairments we made. So we made, I remind you, $4 million -- $4.1 million impairment in the first quarter, mainly remain $3 billion or $3.5 billion impairment in Q2, mainly on [indiscernible] value, and this semester -- this quarter, sorry, so an additional $3.5 billion.

So all in all, it represents more or less impairment of $11 million. So now to answer to that -- to your question, in our accounts, we have a capital employed for Russia, around $6 billion, taken after this -- all this impairment that has been done..

Very clear. Thank you, very much, Jean-Pierre..

The next question is from Michele Della Vigna with Goldman Sachs. Please go ahead..

Thank you, very much Jean-Pierre for all the presentation and the strong set of result. Two key questions from me. The first one on the LNG side, there were exceptional results this quarter despite the effect that there are quite a few shutdowns.

And I was wondering, if perhaps you could give us visibility of when you expect some of this production to come back, especially Freeport, Nigeria LNG and Ichthys returning back from scheduled maintenance.

And then my second question is on your GHG emissions, always very helpful to have it on a quarterly basis, and ongoing strong delivery, especially in the reduction of Scope 3. But there was a 10% increase in Scope 1 and 2 emissions. My understanding is most of it comes from Europe and the ramp-up of CCGTs and the Dutch [ph] refinery.

But I was wondering, if you could give a bit more visibility on that. Thank you..

Yes. So perhaps I will start with the second question. So I'll be very clear. So the increase regarding Scope 1 and 2 in Europe is 100% linked to the CCGT. So I remind you that in 2015, we do not have any CCGT in our portfolio. So now we have a different CCGTs, so in France, in Spain, in Belgium.

By the way, we have started a new facility in France, in Britain beginning of this year. So -- and given that, for obvious reasons, the CCGT performed particularly well during the third quarter. That's the driver behind this increase regarding Scope 1 and 2 in Europe. And your second question regarding our LNG, strong results, despite slowdowns.

So for me, the demonstration that the success of our integrated strategy on LNGs because, we were able to replicate very good and very high performance for -- on the segments, on this LNG business, despite shutdowns. So despite the loss of Freeport cargoes in particular in the third quarter.

So according to the information I have, Freeport is supposed to come back to 100% capacity before November 2020 -- in December this year. Nigeria, it will be probably next year and it is – so the shutdown has been completed and so it's supposed to come back to normal production in the fourth quarter..

Thank you. .

The next question is from Rats with Morgan Stanley. Please go ahead. .

Hi, hello. I've got two questions, if I may. First of all, I wanted to ask if you could say a few words about the impact of the refinery strikes in France during the quarter and say a few words on how that might impact fourth quarter results.

And then also, I heard you comment on distillate yields -- sorry, distillate cracks and that they may continue to be supported as a result of the EU import embargo on Russian oil. This remains a very hard-to-navigate issue.

And I was wondering if you could set out more broadly what you think the impact will be of the EU embargo on Russian oil, both for crude and for product over the next couple of months?.

Okay. So the impact on the refinery strike in France, it's very – it would be a very theoretical calculation because, of course on one side, we lost production in France coming from these refineries, but we benefited for increased margin in our refineries, in Belgium, in particular or in Germany. So, I will not give you a very precise figure.

So it's very, very limited, the impact of the strikes in France over the October month. This year France, yes, they are strong. We think that, of course, the ban on Russian petroleum products that will be effective in February '23 will contribute, of course, to maintain this distillate cracks at very high level.

It will not be so easy for Europe to compensate the loss of these volumes. So, we -- that's why we think that once again, the margin could remain at high level. For crude, it's probably a bit easier to compensate the loss of the ban on crude -- Russian crude that will be effective in December because you can, of course crude from other countries.

But we are very clear that all these bans will contribute to support the prices because of course, Russian crude will need to finance the customers. So it will be in India, it will be Brazil, China, for more globally in Asia. So these countries would benefit from discounted crude.

But on the opposite, the European refiners will have to pay premium to attract new groups. So that's the product of this ban, I think, implemented at the level of the EU..

Okay. Wonderful. Thank you..

The next question is from Christopher Kuplent with Bank of America. Please go ahead. .

Thank you very much. Most of my questions have been answered already.

So maybe just a quick one, Jean-Pierre, if you wouldn't mind, giving us a bit more detail about what you're seeing in terms of demand destruction in your chemicals business and perhaps in your overall sales figures, and how you're looking into next year considering the recession that's coming at us..

Honestly, it's too early, too premature or too early, I think, to give a figure. So in chemicals, we start seeing, but marginally the impact of the possible recession that could happen next year. On our sales at present time, honestly, given the discounts we have in our retail session, we don't see any drop in volume.

So we see outlook for next year for sure realization should have an impact on this -- on chemicals, should have an impact on gas as well. But too early I think to give precise figures..

Fair enough. Thank you very much..

The next question is from Oswald Clint with Bernstein. Please go ahead..

Yes. Jean-Pierre, thank you. Just back on the LNG side, please. I wonder if you could help us just understand a little bit more about how you're doing so well. I mean, obviously, some huge gas price differentials in the quarter, especially around quarter end, which need to be marked to market.

But you're also buying -- I think you're active buying spot LNG cargoes in the quarter. So was it -- is it a case that you are having some losses on hedge deliveries, but offsetting it with new spot cargoes, and we're able to offset that through the profit on those.

Is that something that's going on? And then secondly, I mean, I understand the confidentiality around assets in Qatar, but is there anything you can say around what we might expect, perhaps proportional EBITDA uplift from starting up what is, I think, one of the largest solar plants in the world that you started up this month.

So as we look into next year, is this going to be something material? Thank you..

Okay. So, our performance regarding LNG Co. I think 2021 definitely mark the start of a new real performance for this LNG and electricity trading. And so this business segment quarter-after-quarter very replicates, very strong performance. So, of course, we do not give full details absolute value for our trading business.

But we -- what I can tell you is that we -- in the first quarter, we replicate the LNG gas and power trading replicate the excellent performance of the Q2 of 2022. In Q2 2022, we replicate the high performance we have in the fourth quarter of 2021.

And perhaps you remember that in first of 2022, we announced that we have a very, very high trading performance, and so we qualify in this performance as a lower performance of more than $500 million. So having said that, that's true that we have to record in the Q3 results, so the impact of the Freeport outage.

And so we -- and the loss of cargoes and the fact that, of course, we have to offset hedging losses. But being able to quarter-after-quarter a very good level of performance demonstrate that we are evolved given global portfolio. We have to assess, in fact, these hedging losses. And so we are the worldwide presence.

So we have LNG production in almost all of the main hubs. So in the US, in Qatar, in Australia, just to mention. And of course, we have the energy coming from Russia as well. And so we have given this portfolio and given the outlet we have. So we manage between sources and outlets.

And so it's the way our trading is able to deliver, once again, quarter-on-third quarter, very, very good performance. Qatar, yes. So we -- the solar farm was inaugurated, it was last week, I think, so in Qatar. So it's globally one of the most sizable solar farm worldwide. I think the equivalent of our -- representing 800 megawatts.

I do not have to be honest, the EBITDA, but I will ask my team, and so we can come to you with the figures..

Very clear. Thank you..

The next question is from Lydia Rainforth with Barclays. Please go ahead..

Thank you. And Jean-Pierre good afternoon..

Good afternoon..

The first one, with the strategy presentation, I think the guidance was for gearing to year-end to be at 5%. And essentially, you're already there at the end of this quarter, so -- and I appreciate that the release of working capital and the write-down.

So is there an update as to where you think you'll be at year-end in terms of the gearing number? And then secondly, just bigger picture question in terms of renewables and the low carbon side, we also see higher interest rates, no difficulty accessing finance, greater desire for energy security.

Do you think that starts to change the structure of some of the renewables businesses gives an advantage to company such TotalEnergies? Thanks..

Yeah. So that's true that our gearing is already below 5%, with a net debt up to $5 billion around. It's difficult. It's -- you know that we do not have any magic figure in terms of per target. And so we will -- as a CFO, we'll be more than happy to continue to strengthen my balance sheet and to continue to decrease the gearing.

Having said that, in the first quarter, given -- assuming that we will continue to generate more or less the same level of cash flow from ups. Given the target we have for CapEx at $16 billion globally on a -- for the full year.

Taking into account that we will continue our buyback program at $2 billion that we will pay the special dividend, representing more or less $2.5 billion. I would say that we should remain more or less in the same ballpark, around 4%, or below 5%.

Of course, it will depend on the -- once again, the working capital, but I already mentioned that I do not anticipate as well a very strong variation for the working cap as well. So I would say, more or less at the same level as the level we had end of September.

So for renewables, in fact, for sure, in that sector, it's not necessarily the same in the upstream sector. We have to face inflation and to face higher interest rates.

But in fact, these additional costs, so both inflation and higher interest rate will be passed, in fact, to the final customers when we negotiate the PPA, when we negotiate the contract to sell the electrics because as you know, we target for this type of project to double-digit profitability.

So when we sanctioned the project, we have a clear view on the CapEx. And so we're looking at the CapEx at that time, not to be exposed anymore to the future indication. So, we have a clear visibility on the leverage, on the cost of financing.

And so we adjust in fact, the level of PPA we are ready to sign two days to be in a position to deliver the targeted -- the double-digit profitability. So there is no miracle. I would say, with these interest rates increase on this inflation, we change the threshold or we don't change the methods we use to sanction projects.

On the opposite, I would say that, it would have some positive effect for TotalEnergies because, of course, it will clean, I would say, the competition with less companies able to enter or to continue development in that field..

All right. Thanks very much..

We have the full energy, less competition. So it should be profitable for us, and positive for us..

The next question is from Bertrand Hodée with Kepler. Please go ahead..

Yes, I have just one question left. Coming back on your LNG trading performance, Jean-Pierre, you often refer to your integrated model.

What in your view is making the difference? Is it because you have currently a very large access to re-gas capacity that you have secured that you are able, in fact, to maximize your LNG spot selling price? Or is there other reason for that outstanding performance?.

For sure, having made the acquisition of the LNG and LNG portfolio, I think it was three or four years ago. And you give us some access to 18 million tons of trading [ph] capacity in Europe. So it means that we have more than 50% of the global capacity in Europe.

So it's a huge advantage to -- for our traders to play, in fact, between the arbitrage between the US and Europe. So for sure, is key in this LNG trading performance. Once again, being -- having production contract on the main ops, we have -- I remind you that we are number one LNG exporter in the US as well.

So we had a strong presence in the US, so strong access to US with more than 10 million tons of LNG coming from the US. So this has the capacity through our ships to deliver this to our European customers, thanks to these re-gas capacity and of course, we have on top of that overall subsidies of LNG in Asia, in the Middle East and customers in India.

So all in all, it's allows traders to arbitrate between the different markets. And now given the price of the LNG, each cargo represents something like $80 million -- even $100 million. For its cargoes to remote or to arbitrate between the different markets. Of course, it's a very efficient way to maximize the value coming from that business..

Many thanks, Jean-Pierre..

The next question is from Alastair Syme with Citi..

Hi, Jean-Pierre, it's EU solidarity tax, you mentioned the €1 billion figure, but is this still an estimate and what clarity do you have? I mean you're clearly having some negotiations with different governments.

So, I just wanted to understand where those negotiations stood? And then secondly, in the last few weeks, we've seen a bit of a collapse in spot gas prices in Europe. I know forward markets haven't changed as much.

But do you have any perspective on why you think the spot gas prices have collapsed?.

Yes. So the EU [indiscernible]. So as you know, we will be impacted by this EU solidarity tax in 6 countries in Europe. So it will be France, Germany, Belgium, Luxembourg. So mainly on our refining activities plus Denmark and the France on the E&P activities.

So at present time, there is a lot of uncertainties regarding the implementation of this tax because as you know, the EU, I would say, gave a framework for the solidarity tax and each countries is supposed to adjust or to adapt this frame to locally to their own request.

Having said that, we made a lot -- because there are very uncertainty regarding the rate, the rate that will be used because the EU just gave a minimum tax rate or uncertainties regarding the use of carry loss forward.

So there are -- and the way another uncertainty regarding the fact that the basis, if it would be 2022 or 2023 because in the text, you have 2022 and over 2023. So having said that, we made were engineered, so we made a lot of different calculations with different scenarios.

And all in all, the conclusion that this EU solidarity tax should represent something like €1 billion for the full year 2022. And the EU gas price falling. Yes, for sure, at present time, we see NBP around $20 per MMBtu. It was above $50 per MMBtu, it the end of August, I think. So it's huge drop, in fact, like $20 per MMBtu is not unique.

When you compare the level we had before the crisis. The main reason or the main factor explaining this drop that you know better than I do. And so it's of course, lower demand in Europe due to the temperature, that we had a certain time and so the lower rig mix, of course, in relation with this situation.

The tax, the gas -- the gas tax that are almost cool, they are fully enhance. And so we have been replenished around the past several months. And the strong competition between EU companies and Chinese company to attract energy cargoes to Europe, that's created condition.

On top of that, you had the UK situation with little storage capacity in UK that create another subject, in fact, to evacuate the gas coming from -- coming to UK to other European countries. Having said that, the price will be highly dependent on the temperature, of course, and the final condition in Europe.

Stocks are full, so we anticipate that winter 2022 should not be a big concern for EU, but you will have to release the stock for the winter 2023.

And so given the lag, once again of higher capacity of Europe to completely compensate the possible fall in Russian gas coming through pipelines, it should be highly supportive to gas prices in Europe at that time. So, that's why we -- short-term, I don't know. It's a matter of, once again, volatility, temperature and consumption and so on.

But middle-term, the message will be coming in Europe when we presented our outlook. We are very supportive, particularly for LNG gas in Europe for this transect reasons, so the need for Europe to attract LNG cargoes to compensate the lack of the loss of gas pipe -- Russian gas..

Thank you. Can I just clarify on the solidarity tax? The €1 billion estimate, does that include the tax loss carryforwards, or is that a gross number before you would….

The tax, we made some calculations depending anticipation of what the loop be -- depending on the countries..

Okay. If I…..

[indiscernible] in terms of solidarity tax, depends on country, depends on the situation..

Okay. Thank you..

The next question is from Lucas Herrmann with Exane. Please go ahead..

Yeah. Thanks very much, and good afternoon, JP. A couple as well, if I might, and maybe some points of clarification on windfall taxes as well. I just wanted to go back to LNG and get some better sense of what the hedging policy is now, and the extent to which the length in the portfolio is exposed.

Because, one of the things I think Patrick made quite clear in New York was that, there is uncertainty as to the longevity of the contracts with -- or whether there's sanctioning of the Russian contracts, which for you is not take, I think, 5 million tons per annum.

And that as a consequence, there seems to be a reluctance to actually hedge those volumes. So, can you give us some idea as to the extent to which the length in your portfolio, the uncovered portion of the LNG trading portfolio has increased over the course of -- the last few months, or will increase going into the fourth quarter.

And therefore, you are more exposed to volatility in spot pricing. That was the first question.

The second, just staying with that, can you give us any indication of the cash flows that you derive from trading Russian LNG? Or is that just seen as being too difficult to predict, as you said previously, and therefore, won't be disclosed as part of your disclosure of cash flow from Russia.

But you've clearly taken those cash flows out when you present your strategic view going forward for five years, but they very clearly remain in when you present data today. And then sorry, just going back to Alastair. I'm sorry for the long list.

Just to be clear, the windfall tax that you're referring to or the estimate of $1 billion, is that prorated when those taxes become applicable? I asked because it's considerably more modest than the number that you indicated again at the Strategy Day, when including the UK component, you talked to something near return….

Okay. Okay. So perhaps I will clarify this subject first. So there are two different subjects. So it's the windfall tax profits in the UK. It's already implemented. So with the vote on the implementation in July retroactively to end of May. And so we mentioned in New York that assuming $35 per MBtu over the first quarter, it should represent for 2022.

So from end of May to the end of December, more or less €1 billion -- €1 billion, okay? So it's we put deposit in the UK. So it's implemented. So there is no doubt, in fact, the only certainty of in the MBtu and the production on which this tax will be applicable. So €1 billion or less for this subject.

End of September, given that we have to record over the third quarter in fact, more than four months of with tax profit in the UK. The impact is something like $640 million. The second subject is the EU solidarity tax. So at present, we have nothing in our accounts.

Because -- but once again, there are a lot of uncertainty regarding the way this tax will be implemented. And the figure I mentioned is for these solidarity tax. So €1 billion or $1 billion, we gave exactly the same figure in New York, I remember well because I gave that figure.

And of course, there are some discussions or certainly regarding when the tax will be payable once again, the methodology. And -- but it's supposed to be a one-off that's the main difference compared to the UK windfall tax that is supposed to be applicable since until 2023 -- 2025, sorry.

Okay?.

Great. Thank you. .

Regarding LNG hedging policy. So the – our policy is to hedge the following 12 months. So that's what definitely mentioned already to you many times, but with some exceptions.

And so what has been mentioned regarding Russian assets is that we do no longer hedge Russian volumes since February 2022 to take into account the uncertainty you mentioned regarding the access to the volumes. So that's our policy. So a global policy, but with an exception in Russia..

Okay. And just to be clear on those volumes, I mean $5 million is the contractual element. There was a further 1 million tons that you said you'd committed to take in 2022. So we might take it that 6 million tons of LNG coming from Yamal at the present time is unhedged..

Yes, Yamal, because we hedge only the two first months. So the calculation is correct. And in 2023, it will be something like 5 million tons of sales coming from Russia..

Okay, which will stay unhedged and but can you give us any indication -- please, sorry to ask in terms of the [indiscernible]..

No. What we gave very a very compound change since once again, the publication of the registration documents is the cash that we, -- that our Russian upstream activity are able to generate. And so you will see, that in the Q2 or Q3, it represents more or less $560 million, so for the second quarter -- for the third quarter.

And it will present the dividends, we are able to repatriate in our accounts. So in the Q2, it was [indiscernible]. In the Q3, it was the Yamal dividends..

Okay. All right, I will push further. Thank you very much..

Thank you..

And the next question is from Biraj Borkhataria with RBC. Please go ahead..

Hi there. Actually, I'm going to push a bit further on Lucas' question.

So for the Yamal offtake, can you just confirm whether there's, any restrictions on the difference between earnings and cash flow received from that side of the Russian portfolio? I get that within the equity interest of Yamal at a project level there might be some issues on getting the cash out.

But for the offtake side, should we assume the earnings flow straight to the group cash flow? And then the second question is just on the LNG portfolio overall. Are you able to disclose what the level of spot sales is or spot sales was in Q3, and what you would expect to have in Q4, as a proportion of the portfolio? Thank you..

So Yamal offtake, I'm not sure to have fully understood your question. But we gave -- so the cash we received from Russia on our assets. So it's cash received from Novatek or cash received for Yamal. And once again, you have the figure for the Q2. You have the figure for the Q3.

And so I gave the indication that Q2 represents Novatek dividend and Q3 represent the Yamal dividend in Q3. $350 million Q2 and $350 million more or less the same figure for Q3..

Jean-Pierre, I was thinking more of the offtake side. So you, as a total trading business are buying oil-linked volumes and selling unhedged LNG. Is it fair to assume that, that cash flow that you generate from that part of the business is -- there's no restriction on where the cash resides in terms of going straight to the group cash flow statement..

No. There is no sanction. There is no sanction..

Okay. That's clear..

So our duty is to execute the contract. We have some of the contracts. We have to sell part of the Yamal EV volumes to Europe or to Asia. And by way, it's what the European authority is waiting for us. So no, there is no, restrictions..

Okay. Okay. That's very clear..

And our global portfolio, the global division I already mentioned to you..

No, that's very clear and then the, spot LNG sales?.

Honestly, I do not have the figure for the Q3. My colleagues will come back to you. It should represent something like 2 million or 3 million tons, but then we'll come back to you with the precise figure..

Thank you very much. Thank you..

The next question is from Paul Cheng with Scotiabank. Please go ahead..

Thank you. Good morning, Jean-Pierre. Three questions. One, can you talk about the refinery strike, why I think that they just -- we start in coming days for two of your refinery and farms. Can you confirm what does that those two refinery, why not you shutdown or that you'd still be able to run? That's the first question..

I'm sorry, but the line is very bad, and I was unable to understand your question.

Sorry, could you repeat?.

Okay. Sure. I'm referring to the reason we refinery in France. I think the labor unit that we start strike on Monday.

Can you confirm whether the facilities are currently run made or that has been totally shutdown on those two refineries?.

What I can tell you is that we have the refinery normally. That was shutdown almost October month. And we have a second refinery, so in Fresno for that was impacted as well by the strike. So more or less for October, it's two refineries in France that were impacted by the strikes..

Okay.

And can you also tell us that whether there's any upstream production contract, any meaningful explanation for 2023 or 2024?.

Sorry, I haven't understood.

So it's about the upstream contracts, but what is your question, on this contract?.

Yeah. Any meaningful upstream production contract will expire in 2023 or in 2024? Like….

You mean the development contracts?.

No. Production contract life. You have coupon contract, tapes, one contract expire early this year.

I just want to know if that any other meaningful production contracts in your portfolio will be expanded in 2023?.

What do you mean production contracts?.

Operating contracts..

Okay. Honestly, I have nothing in mind because we have -- the end of the [indiscernible] contract, it was end of last year. So we have the same on Bangkok in Thailand. So we withdraw from Myanmar, just to remind you the main contract that that were indeed very recently.

But on top of that, in the current month, I do not think it will be -- I have nothing in mind -- I have nothing sizable in mind. No..

Okay. Perfect. Thank you..

And by the way, the production is supposed to grow over the next couple of years. Thank you..

The next question is from Amy Wong with Credit Suisse. Please go ahead. .

HI, good afternoon, Jean-Pierre, a couple of questions from me, please. The first one is on your Casa dos Ventos acquisition in Brazil announced yesterday.

What kind of debt levels sit in CDB at the moment? And what kind of CapEx per megawatt should we be expecting for that development pipeline? And then my second question relates to just your capital return policy. I think at the Capital Markets Day, Patrick said that the 35% to 40% cash flow to shareholders had a soft selling.

What kind of conditions would we have to see to see you guys go beyond that selling? Thank you..

Yes. So the capital return policy. So yes, we're very clear in the guidance given by the Board, the information of the guidance we gave to the market end of September. The condition -- having said that, you're right that Patrick Pouyanné mentioned that the 40% is not the limit. So the 45%, 40% is the guidance, but there is no limit.

In fact, the 40% is not a selling. So what would commit us to go beyond that, of course, the environment is at a very, very high level. So if you have, at the same time, oil, gas prices, refining margins, petrochem, all our business in trading performing particularly well. That's what I can tell you. On the Brazil acquisition, so we announced yesterday.

So it's -- the fact that we will create a just venture with Casa dos Ventos, so in Brazil so it's the largest renewable energy developer in Brazil we will have a stake of 34% in that JV, but having an option to acquire an additional 50%, so that to be more or less 50-50 in the coming years in the JV.

The CapEx per megawatt, I think, is not very relevant given the fact that we acquired 50% of the portfolio already in production or at early stage, but also 50% of the portfolio that will come -- that will be developed in the coming years. All in all, so we pay the front cash payment of $550 million.

So I think it's particularly in line with our abilities to have assets able to deliver return on equity above 10%. But once again, the comparison with the other portfolio, I think, in that case it's not dividend..

Okay. Can I squeeze in a quick one? It's nice to see that you guys are in a one month salary bonus for all employees.

Could you just comment -- I mean, give me just an idea of what size, what the total amount of that is and if it's been accrued in your 3Q numbers?.

Right. It represent more or less 7% of the global salary cost, but it will be capped. So there will be a minimum, but it will be capped as well €6,000 per employee. So more or less 7% under salary costs, worldwide..

Great. Thank you very much..

It will be -- it's not in my Q3 numbers. It will be in my Q4 numbers, of course..

Okay. Got you. Great..

The next question is from Henri Patricot with UBS. Please go ahead. .

Yes, Jean-Pierre thank you for data. Just one quick question left, which is around the lag effect on dividends on equity affiliates that you mentioned. Is that something that is meaningful and we should expect a catch-up in the fourth quarter, maybe beginning of next year? Any details on that would be helpful. Thank you. .

Well, it's obvious that we -- the performance in the Q3 is particularly linked to the performance in the energy sector and so the LNG business is in the majority of the KCs, accounting on an equity basis.

So that means that, of course, you have on your net operating income, the immediate effects of the performance, but in cash flow generated from operations, of course, you have to wait for the dividends at all. There are some rules depending on the country, depending on the partnerships.

And so it's not -- you do not have an immediate effect on your cash flow cyclical. So there is a timeline effect between the increase of impact on the net operating income, and the impact you will have on the cash flow from [indiscernible]. So I cannot answer to you. It depends the geography, it depends the business.

So it's a time line between, I would say, around six months, something like that. It depends because on geographies you are able to put in place interim dividends to accelerate, in fact, the cash out from the businesses. In the sum of geographies, you have to wait because they are just on dividend value. So it's a mix between the different situations..

That’s it. Thank you..

The last question is from Kim Fustier with HSBC. Please go ahead. .

Hi. Good afternoon. I had two questions, please. The first one is that I was intrigued by your comments that you're not seeing cost inflation in upstream other than that coming from higher energy costs. We're hearing from other companies that were great going up late cost of rising.

So I was wondering if you could offer any more color on upstream costs and the broader operating and sanctioning environment in the upstream. My second question is on refining. And specifically, if you could give an update on the Leuna refinery in Germany that used to be supplied exclusively by Russian pipeline crude.

Now that we're a little more than a month away from the start of the EU embargo in December, is the Leuna refinery now able to fully run on non-Russian seaborne crude. Thanks..

No cost inflation. Yes, so I confirm my comment that at present time, given that we are not very present in the US share, we do not see really inflation in our costs. Of course, still weather difficulties. I have in mind projects that was presented, I think it was six months ago, it was just after the beginning of the war between Ukraine and Russia.

And at that time, the teams came to the explain with asking us to sanction the project with an impact on the steel price around plus 40%, something like that. So at that time, we said, no, we are not in here to sanction projects. And so it's the way we mitigate in fact, this cost inflation, if – in some contracts, we have to face this situation.

We are not in a real use, so we have to be patient. We have time, in fact, we sanctioned project. It's not volume already. But, obviously, at present time, given, globally, the investment that has been done by all the oil and gas companies since 2015 or 2016. Globally, we do not see a strong inflation.

And so we do not anticipate strong inflation in our books in the coming months. Russia. So Leuna was designed, in fact, to run Russian crude.

So as you know, and so we are very clear it was very early in the year, which was in March when we published our rule of conduct regarding Russia that we no longer buy any spot Russian crude to supply our refineries and of course, Leuna, it was the first case for Leuna. Before the crisis, almost 100% of the crude run in Leuna was Russian crude.

I think the right figure is 95%. So we have to find alternatives. And so the alternatives will come for the time coming from Poland in fact. And so we had to import seaborne crudes to compensate the lack of the loss of Russian crude. I will not tell you that it's easy.

We are very clear we, of course, we have discussion with German authorities to make them aware of these difficulties, of this concern. So we see – at the time, it's – it was seaborne to have more or less 800 kilotons per despite coming from Poland. We see in the next future if we continue with this alternative source to supply with Leuna refinery..

Okay. So I think it was the last question. Okay. So thank you very much for your time. And so I will give you rendezvous now. I think now it will be in February for the 2022 results. Thank you again. Bye-bye..

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect..